Election 2011

[Good2Golf]

I heard this on CJOB. What a load of crap. I hope someone schools her on her yellow journalism.

No, this is tongue-in-cheek, Mr. Seggie. 

She doesn't think people would see it for anything other than the satire that it is........right?  :-\

 

[Brad Sallows]

>What would the deficit be if they hadn't made those two rather short-sighted and foolhardy GST cuts?

I can play that game, too.

What would the deficit be if (mostly Liberal) governments hadn't overspent by ~$65B from 1975 to 1987, inflating our accumulated deficit from ~$30B to ~$260B just in time for high interest rates to push it up to ~$575B by 1997?  (All debt accumulation from 1987 until our recent re-entry into operating deficits was due to debt servicing charges.)

What would the deficit be if Chretien & Martin had not cut income taxes?

What would the deficit be if Chretien & Martin had put every surplus penny toward reducing accumulated deficit rather than blowing some of it distributing goodies in a form of "March Madness"?

Our current deficit is somewhere between 2/3 and 3/4 due to the cost of servicing debt.  What a fricking shame those paragons of fiscal rectitude, the Liberal Party of Canada, created such a big one.

A point of GST is worth about $10B per year.  By one estimate I read when the cut was first discussed, it is also worth about 300,000 jobs.  That's about $35,000 per job, but it seems like a better use of money than paying benefits to unemployed people.

The Liberals, NDP, and Bloc all have significant program spending shopping lists.  No thanks.

 

[Redeye]

Actually Redeye, from my point of view it is very easy to argue against increasing CPP. At what point do we say enough and start holding people accountable for their actions? What you and others are proposing takes money out of my pocket while I'm trying to save for retirement and hands it to those too irresponsible to bother saving for their own retirement. Also we hand the money to a bunch of overpaid, over pensioned bureaucrats to mismanage. You may think that the CPP is well managed, I for one do not. Lending the money to the provinces at 1 or 2% interest hardly qualifies as a good investment since it is our tax dollars that are paying the interest.

KJK

That's great.  I'll submit that you probably don't know very much about how the CPPIB invests, and you've demonstrated that amply, but I have a fairly good base of knowledge.  And they do a very good job of it, at a very good price.  In fact, the only pension as well managed in this country is probably the Ontario Teachers Pension Plan.  In terms of the CPP's asset mix, it's more than half invested in a wide variety of equities, and the other half includes government and corporate bonds, including those from other countries, as well as real estate and infrastructure assets.  Their operating costs are quite low, as well.  If it was possible to buy a mutual fund that mirrored the CPP's  portfolio, it'd sell like hotcakes.  On top of that, its operating costs are relatively tiny.  And all transparent.

 

[Redeye]

[rabbit hole]
The PSSA and other federal plans are integrated with the CPP, with the plan providing essentially a core benefit plus a bridge benefit that is lost at age 65.  There are loud complainers who dislike the fact that their pension is "reduced" at age 65; apparently all the briefings they received about their pension were ignored, and they faile dto ever read any information about it.
[/rabbit hole]

I'm only now being in a town full of federal government employees starting to wrap my head around the way the PSSA works, because it seems, at least how the payments are presented to annuitants, to be far more complex than private sector pensions (or even provincial public sector pensions).  The large gap, however, seems to be that people don't understand that they haven't paid for that bridge benefit that ends at 65 to extend beyond that, and that's how the CPP was designed to work.  I vaguely remember one of my mentors ages ago explaining that there's a bit of a difference in how it works but honestly can't remember it anymore... will have to look into it.

In any case, the proposed concept of Pooled Retirement Pension Plans that the Conservatives have trumpeted also isn't a bad idea - sort of a happy medium, and perhaps one that's worth looking into further, but I don't know that they'll be any better or cheaper managed than the CPP.

 

[Redeye]

>What would the deficit be if they hadn't made those two rather short-sighted and foolhardy GST cuts?

I can play that game, too.

What would the deficit be if (mostly Liberal) governments hadn't overspent by ~$65B from 1975 to 1987, inflating our accumulated deficit from ~$30B to ~$260B just in time for high interest rates to push it up to ~$575B by 1997?  (All debt accumulation from 1987 until our recent re-entry into operating deficits was due to debt servicing charges.)

What would the deficit be if Chretien & Martin had not cut income taxes?

What would the deficit be if Chretien & Martin had put every surplus penny toward reducing accumulated deficit rather than blowing some of it distributing goodies in a form of "March Madness"?

Our current deficit is somewhere between 2/3 and 3/4 due to the cost of servicing debt.  What a fricking shame those paragons of fiscal rectitude, the Liberal Party of Canada, created such a big one.

A point of GST is worth about $10B per year.  By one estimate I read when the cut was first discussed, it is also worth about 300,000 jobs.  That's about $35,000 per job, but it seems like a better use of money than paying benefits to unemployed people.

The Liberals, NDP, and Bloc all have significant program spending shopping lists.  No thanks.

Chretien & Martin I think tried to have something for everyone in their budgets, but without question, like all politicians are apt to do, they also give to their supporters.  That included tax breaks, specifically income tax breaks, which probably at the very least more progressive than cutting consumption taxes, and maybe marginally effective at stimulating economic growth.  I'm pretty skeptical of the idea that "tax cuts = growth, without increasing deficits" claim because no one yet's really been able to show me a good historical example of how that's worked, ever.

I almost fell off my chair when I read the "300,000 jobs" claim, though.  I can't find anything to support that claim - and it's still almost universally accepted that the cut was a bad policy decision.  By your logic of moaning about debt servicing costs, why should the government sacrifice any means of earning revenue in place?

 

[mariomike]

In fact, the only pension as well managed in this country is probably the Ontario Teachers Pension Plan. 

OMERS is pretty good too: "OMERS Again Awarded Global Pension Fund of the Year, Canada by World Finance":
http://www.omers.com/corporate/news_article.aspx?newsid=3575

 

[Redeye]

OMERS is pretty good too: "OMERS Again Awarded Global Pension Fund of the Year, Canada by World Finance":
http://www.omers.com/corporate/news_article.aspx?newsid=3575

That's true, OMERS is good - they screwed themselves with the contribution holiday in the middle of the last decade, but that was basically forced on them.  Teachers has actually suggested they'd be willing to manage other firms/organizations' pensions as part of their system - but I'm sure that the list of conditions they'd want fulfilled before accepting such a massive potential liability would be huge.

Back to election issues, I'm looking forward to this campaign.  It will be interesting to see what Mr. Ignatieff does to try to shake off the rather vicious hits the Conservatives have launched on him.  I'm anticipating no major changes after the election's concluded, but there's a potential for a lot of different things.  As long as the outcome isn't a Conservative majority, I think I can live with whatever comes.  I'm not enthused by any of them for now.

 

[a_majoor]

By your logic of moaning about debt servicing costs, why should the government sacrifice any means of earning revenue in place?

The government does not "earn revenue" it takes money from production and productive citizens.

The problem is spending; cut spending and the budget comes into balance, make further cuts and the debt can be paid down. Provide tax cuts from the savings due to spending cuts and the economy will ramp up.  Tax cuts on their own will also cause the economy to ramp up, but without corresponding spending cuts the effect is simply consumed by greater spending. Economic growth (and government spending) exploded in the United Statesdue to tax cuts in the 1920's, 1960's and 1980's, the UK during the early Thatcher years and Ontario during the Harris years, so the proof is there for anyone to see.

As for the GST cuts, I have seen figures of 110,000 jobs being created; I suspect the intent was to quantify the amount of potential job creation that would be due to the release of the resources back into the productive economy. A common figure of merit is a full time job requires $50,000 of investment, by that metric the GST cut should generate 200,000 jobs. 110,000 jobs would imply an investment of $91,000 per job, which seems a bit high, so the true figure falls somewhere in between.

 

[Redeye]

The problem is spending; cut spending and the budget comes into balance, make further cuts and the debt can be paid down. Provide tax cuts from the savings due to spending cuts and the economy will ramp up.  Tax cuts on their own will also cause the economy to ramp up, but without corresponding spending cuts the effect is simply consumed by greater spending. Economic growth (and government spending) exploded in the United Statesdue to tax cuts in the 1920's, 1960's and 1980's, the UK during the early Thatcher years and Ontario during the Harris years, so the proof is there for anyone to see.

Yeah, I don't know why people trot out this ridiculous meme.  Under Reagan and Thatcher, deficits soared, and while the economy on aggregate grew, disparities between rich and poor increased markedly.  That suggests that it's harder to pull one's self up by one's bootstraps, so to speak.  They're lionized for reasons I don't quite understand, because they left fiscal messes in their wake, which their defenders will still try to apologize for.  Ditto with Mike Harris and the Common Sense Revolution that didn't really do much of anything, and then left the province with cooked booked and bad privatization details.

As for the GST cuts, I have seen figures of 110,000 jobs being created; I suspect the intent was to quantify the amount of potential job creation that would be due to the release of the resources back into the productive economy. A common figure of merit is a full time job requires $50,000 of investment, by that metric the GST cut should generate 200,000 jobs. 110,000 jobs would imply an investment of $91,000 per job, which seems a bit high, so the true figure falls somewhere in between.

Really?  Where?  And what sorts of jobs?  I'm interested in good research on this but I don't seem to find any.  As for figures of merit, according to whom, exactly?

 

[SeaKingTacco]

What sorts of jobs?

Seriously- does it matter?  Any sort of private sector job is inherently more productive to the economy than a public sector job.  That is not to say that we do not need a public sector, let's just be realistic- 100% of the wage of a Public servant comes from the taxes paid by a private sector worker, or from money borrowed by the Government.

And don't start the BS that "some jobs are beneath some people's dignity".  Any work is better than the trap of welfare or EI.

 

[Redeye]

What sorts of jobs?

Seriously- does it matter?  Any sort of private sector job is inherently more productive to the economy than a public sector job.  That is not to say that we do not need a public sector, let's just be realistic- 100% of the wage of a Public servant comes from the taxes paid by a private sector worker, or from money borrowed by the Government.

And don't start the BS that "some jobs are beneath some people's dignity".  Any work is better than the trap of welfare or EI.

I wasn't - I meant, were these jobs permanent, full time jobs, or short term ones? What sectors benefited most?  Since that is a determinant of the "return on investment", it's pretty key.

 

[SeaKingTacco]

Seen.

 

[Brad Sallows]

I believe Thatcher and Reagan are lionized because the sh!tty economy course charted during the '70s was changed during their watch.  And while it's fair to lay the blame for budgets at the PM's door in a parliament, it's a laughable oversimplification to lay it at the feet of a US president - I recall we already had that discussion.  The point of a tax cut to promote economic activity is to reap benefits later, just as the point of buying a bond instead of spending now is to reap benefits later.  Obviously there is an opportunity cost to be paid in the immediate term.

I would just as soon not have had the income tax and GST cuts and instead dealt with public debt, but if my taxes in excess of today's operating costs aren't to be used to pay yesterday's deficit operating costs, I'd like them back in my pocket.  I simply see nothing that the LPC, NDP, or Bloc are offering which promises better fiscal management, and fiscal management is the only problem which matters right now: all the other items on wish lists are just academic discussions if there is no sustainable foundation to pay for them.  Infrastructure doesn't crumble because there is no money to replace it; infrastructure crumbles because politicians and many people on public payrolls would rather cut ribbons for new projects than maintain what we already have.  Governments at all levels are swimming in revenue; they're just p!ss-poor at setting priorities.

 

[KJK]

That's great.  I'll submit that you probably don't know very much about how the CPPIB invests, and you've demonstrated that amply, but I have a fairly good base of knowledge.  And they do a very good job of it, at a very good price.  In fact, the only pension as well managed in this country is probably the Ontario Teachers Pension Plan.  In terms of the CPP's asset mix, it's more than half invested in a wide variety of equities, and the other half includes government and corporate bonds, including those from other countries, as well as real estate and infrastructure assets.  Their operating costs are quite low, as well.  If it was possible to buy a mutual fund that mirrored the CPP's  portfolio, it'd sell like hotcakes.  On top of that, its operating costs are relatively tiny.  And all transparent.

Well Redeye, it would appear my info was a little out of date as far as the current asset mix goes however as recently as 2000 their portfolio was about 92% fixed income, e.g. government bonds.

As for their operating cost I can't find anything that stated what their MER is but I would highly doubt it is anything like the MER of ETFs running in the .07-.35% range. If you are referring to the many CDN mutual funds with MERs running from 3-5% then that is sort of believable but why would anyone buy something like that is beyond me. Government = inefficient generally speaking.

You also didn't answer me as to why you think that I should pay double what I currently pay in CPP to bail out these clients of yours who were too irresponsible to bother saving for retirement.

KJK

 

[Redeye]

As for their operating cost I can't find anything that stated what their MER is but I would highly doubt it is anything like the MER of ETFs running in the .07-.35% range. If you are referring to the many CDN mutual funds with MERs running from 3-5% then that is sort of believable but why would anyone buy something like that is beyond me. Government = inefficient generally speaking.

Wow, another topic you don't seem to know anything about.  With about 3 notable exception I've never seen mutual funds running 3-5%.  MER wouldn't be the term applied to a pension fund, but its operating costs would be closer to what ETFs are.  Around 20bps if I remember right.

You also didn't answer me as to why you think that I should pay double what I currently pay in CPP to bail out these clients of yours who were too irresponsible to bother saving for retirement.

Well, I didn't say that to begin with.  CPP pays you out an annuity based on what you pay in, and that's it - just like any other pension does.  The Canada Pension Plan was designed to provide 25% of the average industrial wage in Canada in retirement - that's what the Yearly Maximum Pensionable Income is based on, what the contributions are based on, and what the payments are based on.  If instead it was to provide 50% of that, it would thus be an excellent form of forced savings for workers.  Other pensions would adjust their integration accordingly, and ultimately, people would probably be better off.  There's nothing there that suggests you're bailing out anyone, because that's not how the pension works.

 

[KJK]

Wow, another topic you don't seem to know anything about.  With about 3 notable exception I've never seen mutual funds running 3-5%.  MER wouldn't be the term applied to a pension fund, but its operating costs would be closer to what ETFs are.  Around 20bps if I remember right.

Well, I didn't say that to begin with.  CPP pays you out an annuity based on what you pay in, and that's it - just like any other pension does.  The Canada Pension Plan was designed to provide 25% of the average industrial wage in Canada in retirement - that's what the Yearly Maximum Pensionable Income is based on, what the contributions are based on, and what the payments are based on.  If instead it was to provide 50% of that, it would thus be an excellent form of forced savings for workers.  Other pensions would adjust their integration accordingly, and ultimately, people would probably be better off.  There's nothing there that suggests you're bailing out anyone, because that's not how the pension works.

Quite the condescending attitude. As I look at the 1st page of mutual funds listed on my brokerage account I see 3 Acker
Finley mutual funds with a 3-5% MER.

As for the CPP operating costs, they were 599 million + trading costs in 2007-2008 according to the Annual report. It states 122 billion under management so that would be 49 basis points + trading costs if I am reading this correctly. I will admit this is better than I expected but still a good bit higher than the ETFs I invest in.

As for the "not bailing your clients out" if they paid for a 25% average industrial wage pension and they receive a pension of 50% of average industrial wage I would call that a bailout.

The problem here is that you appear love the nanny state and I detest it. I believe there should consequences for behavior and you don't appear to. I remember the Grasshopper and Ant fable. It seems applicable here only you want the government to force the Ant to have to put aside some of his hard work so the Grasshopper doesn't starve.

KJK

edited to add a qualifier to the CPP cost.

 

[larry Strong]

Are you saving $14,180 a year for your pension? That is how much you would have needed to save – every year for the last 35 years – to pay yourself a pension equal to that of a federal public servant retiring today

http://taxpayer.com/node/13429

I don't know many peiople on civy street who can afford to put $1200 a month into a RRSP acount......

 

[KJK]

Are you saving $14,180 a year for your pension? That is how much you would have needed to save – every year for the last 35 years – to pay yourself a pension equal to that of a federal public servant retiring today

http://taxpayer.com/node/13429

I don't know many people on civy street who can afford to put $1200 a month into a RRSP account......

If you are asking me Larry, I put in more than that these days. I could have a lot of fun with the money now but I prefer to know that I will have a comfortable retirement. I have never tried to compare my retirement savings to a public servant's indexed pension. As for other people I can't speak for them but I do know quite a few people who complain about how broke they are but they have a new house, 2 new cars, a boat and a travel trailer that are all financed. 

I'm not against having the CPP, only against a sudden huge jump in benefits for people who have finished paying into it while I and others will have to pay and hope there is still something there when I retire. Especially considering that certain parties want to give immigrants CPP benefits after paying into the plan for a very short time. As long as it is being used for a political football and is/was based on a Ponzi scheme I don't have much faith in it.

KJK

 

[larry Strong]

The average wage in Canada is around $24 and the average weekly income in 2009 was 805 a week before any deductions or taxes. Lop a third off for taxes/deductions and average income will be around $1200 a pay check. Rent/Mortgage (average rent in Ontario in 2009 ranged from $650 - $1200), food, utilities, mad money, loans, kids/child care, cloths, gas.....and on......and on....... So where are the average (that is the majority of Canadians) John and Mary six pack supposed to come up with money for retirement.....

And yes those with the toys etc have no excuse if they do not think of the future

http://www4.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=18
http://www.livingin-canada.com/work-salaries-wages-canada.html
http://www.settlement.org/sys/faqs_detail.asp?faq_id=4001280

 

[KJK]

Larry,

IMHO you are absolutely correct about the deductions but the reason they are so high is to feed the nanny state. I remember reading somewhere, perhaps even on this board that PET increased the size of the civil service 10x. Was this required? The country had run for 100 years on the smaller government and seemed to do fine. Also remember that 9.9% of your income is removed from your pay before you get it just for the CPP and now some are proposing we double that amount. I don't think your employer is going to give you a 10% raise just because the government now wants twice as much for CPP. If this comes to pass John and Mary Sixpack are going to be living on even less anyway.

FWIW I grew up on a dry land farm in the middle of nowhere SK. We never had much especially in the 80's with droughts and all. I remember having far less than most of my friends, we shopped at the Sally Ann etc so I had a fair bit of incentive to work my way out of that situation. I now live live in an older area of Edmonton. Most of the old Ukrainians are passing on or moving to assisted care facilities and the area is filling up with immigrants from all over the world. These people can certainly show the average Canadian about how to live below their means. One of my friends owns a DQ and employs several Filipinos. These girls make around $12/hr and still send home over half their after tax income. Every Friday at the post office here there is a long lineup of people using Canada Post to send money all over the world to their families and I'm sure most make far less than the average Canadian. Redeye I assume will be along shortly with the exact figure.

Most people would be horrified if they knew exactly where their money went. The joke about a latte or whatever a day is so true. I can't say I'm much better with my money only I pay myself first then piss away the rest. I started with $50 per month into what turned out to be worst mutual fund I could have chosen yet 10 years later there was a nice balance there. As Redeye has noted a couple of times I don't know much so if I can do it so can almost anyone.

Off my soapbox now.

KJK

Note: I realize that the employee contribution for CPP is only 4.95% but the employer matches that so effectively it is your money paid to the government, you just don't see it.